Education Loan Overview

Nothing will replace quality education when it involves building a bright and booming future for your kid and education is the sole factor that may get a cheerful life going. However, thanks to the rising price of upper education for college kids in Asian countriesand abroad, oldster’s area unit finding it additional and harder to self-finance their children's education thus there's a large demand for loans to hide education expenses. In contrast to most academic establishments nowadays, educational loans area unit given to merit able and meriting students so nothing hinders their progress and that they accomplish the simplest of education weather in Asian country or abroad. At present, nearly each Asian country bank and NBFC supply education loans in India to students inquisitive about following a large variation in graduate, post graduate, skilled and academic degree courses/degrees.

The quantum of expenses coated by this kind of loan covers not only the direct expenses like tuition fees and registration/examination fees, but also allied expenses like those for uniforms, work equipment/tools needed for the course, travel expenses and portable computer. Apart from the fee collectable by the school/college, alternative expenses coated by most education loans include:

 Amount needed towards the acquisition of books, uniforms, instrumentation and instruments.

 Purchase of computers/laptops, if deemed necessary for the completion of the course..

 Fees obtained Exams, Library, Laboratories, Hostel, etc.

 Building fund, Caution deposit, Refundable deposit (must be supported by receipts/bills).

 Costs incurred in travel, specifically for studies abroad.

 Further prices those area units needed to with success complete the course, as well as however not restricted to, Study tours, Thesis work, Projects, etc.

Now you can compare interest, processing fee, tenure and max. Loan offers, of all the banks before choosing your desired loan.

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Features of Education Loan

All loans are not created equal, Business loan has become a great option for people to use.

AnEducation loanplan is a safe and efficient way to gain finance for when compromising on your child’s education is not an option.

Loan cannot be assigned to the student alone, the parent or guardian needs to be co-signor for the loan.

Female students are usually offered discounts and/or lower interest rates when it comes to education loans.

The annual family income and the course pursued by the education loan applicant are primary determinants of the loan amount.

Generally, loans below Rs.4 lakhs do not require a security or guarantor.

For an education loan plan up to a specific amount, no collateral is necessary for a higher loan amount (usually above 7.5 Lakhs), security in the form of fixed deposit, property or other bank approved collateral is required.

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Comparision Of Education Loan

compare Education loan interest rates by banks

# Providers Interest Rate Processing Fee
1 SBI Education Loan 12.55%-17.65% 1%-3% of the loan amount + applicable Service Tax
2 Axis Bank Education Loan 11.25%-24% 1.50%-2.00% of the loan amount + Service Tax, as applicable
3 ICICI Education Loan 11.29%-22.00% Upto 2.50% of the loan amount + Service Tax, as applicable

Documentation needed to apply for a Education loan:

Along with a duly filled education loan application form of the lender bank/ institution and photographs, the applicant is required to submit the following documentation:

Documents for Education Loan

 Letter of admission confirmation received from the college/institution

 Fee breakdown, stating the tuition fees and other charges provided by the college/institution

 Copies of mark sheets starting from class 10th to the last qualifying exam cleared

 A declaration/affidavit to confirm no other loan has been availed for the same or another course

 Identity and signature proof [ Passport, Pan Card, Driving License, Voter ID Card, Aadhar Card or the Employee identity Card in case of government employees ]

 Address Proof [ Bank statement, Rent Agreement, Voter ID Card, Ration Card, Passport, Driving License, telephone, electricity, or water bill, Credit Card Bill or Property Tax ]

 Age Proof [ Voter ID Card, Secondary School Certificate (class 10), Birth Certificate, Passport or Aadhaar Card ]

 Income proof of co-borrower or the applicant if he/she is employed

 In case of a salaried individual [ Latest salary slip with Form 16 or Salary account bank statement for the six months prior to applying for an education loan ]

 Self-employed businessmen/professionals [ Latest ITR, computation of income, Profit & Loss and Balance Sheet certified by a CA, Business continuity proof ] Qualification proof of highest professional degree acquired

Frequently Ask Questions

If you have a question that deals with clients, customers or the public in general, there is bound to be a need for the FAQ page.

Education loans are offered by banks to students to enable them to pay for higher studies such as graduation and post-graduation courses, both in India and overseas. Apart from the tuition fees, other aspects of expenses such as hostel charges, equipment purchases and other course related expenses may also be covered by the education loan. In case of overseas studies, many education loan providers include the price of a return ticket into the education loan corpus.
As most students have no previous credit history, the parent or guardian has to co-sign for an education loan as a guarantor. Moreover, education loans also require key lender approved collateral such as property documents, fixed deposits, etc. Though there is an interest free (moratorium period) for an education loan, if you service the interest accrued on an education loan during the period, you may receive a further discount on the education loan.

Every bank has its own eligibility criteria for dispensing education loans, but a few common parameters are:
Applicant should be an Indian national.
* Applicant should have confirmed admission in a college/educational institution at the time the loan application is made.
* Applicant should be in the age bracket 16–35 years.
* The Applicant should have a co-borrower such as a parent who acts as guarantor for the loan
* Collateral in the form of a fixed deposit etc. is required for loan amounts higher than Rs. 4 lakhs.

Documents that are to be submitted with the education loan application include:
Admission confirmation letters and papers validating any scholarships the applicant has qualified for.
* Schedule of expenses for the course including tuition fees and other expenses.
* Score sheet of qualifying test(s).
* Copies of foreign exchange permit/student visa for overseas studies.
* Bank account statements for last 6 months. (Can be a joint account with parent/guardian)
* Statement of assets and liabilities of borrower.
* Proof of age
* Proof of residence
* 2 passport size photographs
* Documents related to collateral required for education loans exceeding Rs. 4 lakhs

Education loan can be availed for all courses recognized by the UGC in case of India and all regular courses abroad. Each lender has its own list of educational institutions and courses that they would provide a loan for whether overseas or within India.

Education loans can be used for paying:
Tuition fees and hostel expenses
* Exam, library, and lab fees if applicable
* Any refundable caution deposits paid to the educational institute
* Cost of books, uniforms, and other essentials for completion of course
* Travel expenses (return fare for international flights.

Yes, for all full-time courses a co applicant is required. The co-applicant can be Parent/Guardian or Spouse (if-married).

Your parents/ guardian can be a co-borrower as well as spouse in case of a married applicant. The co-borrower should have a steady source of income and a good credit history in order to improve the applicant’s chances of a successful loan application.

Most lenders have a maximum limit of Rs 10 lakhs to Rs 15 lakhs for studies within India, while the maximum limit on education loans for overseas studies is between Rs 20 lakhs to Rs30 lakhs. In case of some lenders, the applicant can get a higher loan amount sanctioned provided bank-accepted collateral is provided.

The average tenure for an education loan is between 5-7 years in case of most lenders. However, some lenders can offer a longer tenure of up to 15 years in case of higher loan amounts.

Banks generally fund up to 90% of the education expenses as loan and some even provide loans for 100% of education expense. However, the exact loan amount an applicant is eligible for depends on a range of factors including the monthly earning of the parent/legal guardian, the value of collateral provided, the academic record of the applicant and other factors.

Most education loan providers do not charge a margin on education loans equal to or less than Rs. 4 lakhs. For higher loan amounts of up to 7.5 lakhs, banks and NBFCs have a margin of around 5% i.e. they provide loan amount equal to 95% of the course cost and the rest must be borne by the applicant. In case of higher loan amounts, the lender may decide to set margins on a case by case basis according to internal policies.

The requirement of collateral varies from one bank to another; however, the following is generally the thumb rule:
For loans up to Rs. 4 lakh – No collateral or Third -Party Guarantee is required.
* For loans from Rs. 4lakh to Rs. 7.5 lakh – Collateral is not needed but third-party guarantee is required
* For loans above Rs. 7.5 lakh – Collateral is required. Some of the key types of collateral accepted by banks include LIC/NSC/KVP, Fixed Deposit held with the lender, property documents owned by the applicant or co-signor.

The tuition and hostel fees are disbursed directly to the institute as per their schedule and fee structure usually in the form of a draft. Other components of the loan such as course-related expenses for lab equipment, laptop computer, uniform, travel expenses etc. may be claimed by and provided to the loan applicant.

Some banks perform independent verification of the employment records of the loan cosigner, which typically include parent/guardian or spouse (if married) of the student who is applying for the education loan. In case the details provided cannot be verified, the loan application may be rejected by the prospective lender.

Each student is given some time by the bank before the repayment tenure starts. This is the time granted by the lender before the repayment begins is referred to as the holiday period. It is usually either 6 months to 1 year after the successful completion of the course, or the time it takes the borrower to start working at a job, whichever is earlier.

If there is a break in the course or the borrower chooses a sabbatical, it is entirely up to lending bank’s discretion on whether to add a few months to the holiday period.

Loan borrowers can avail tax benefits on interest paid on education loan under Sec 80E of the Income Tax Act. This benefit is available over and above the Rs. 150,000 deduction allowed under Section 80C. Tax benefits can be availed once the borrower starts paying the interest on the education loan. Further, the deduction is available until the borrower pays off the full interest amount on the loan or for a maximum period of 8 years, whichever is earlier.

Most banks do not levy prepayment penalty on education loan. However, it is best to check with the bank before signing the dotted line.

Earlier, having an account in the bank from where the borrower was hoping to get a loan used to be an important criterion. Now it is no longer a mandatory requirement. If you have an account with the particular bank, it usually becomes easier to get the loan sanctioned. This is because of your prior relationship with the bank, your past financial records and transactions can be analysed faster to make a decision.